Corporate governance and firm value: a comparative analysis of state and non-state owned companies in the context of Pakistan

Abstract

Purpose The purpose of this paper is to examine how corporate governance instruments impact firm value in the context of Pakistan. This paper considers state- and non-state-owned enterprises and examines whether the influence of corporate governance on firm value varies across firms having different nature of ownership. Design/methodology/approach This study opts for an unbalanced sample of state- and non-state-owned enterprises for the period 2010-2014. Panel data regression is adopted for estimation of main results. The suitable model, i.e. fixed and random effect model, is selected using Hausman specification test. Findings The notable findings show that board independence has a significant and positive relationship with firm value only for state-owned companies. Furthermore, the results show that market capitalization and return on assets have a significant and positive association with firm value for both state- and non-state-owned enterprises. All other variables are found insignificant for both state- and non-state-owned companies, but the results are consistent with those reported in previous studies. Practical implication The findings of the study suggest that fair induction of independent directors, appropriate board size and cost-benefit analysis to conduct frequent meetings can help corporations to improve their performance. Originality/value This study is adding to the current literature by providing new insights and shows that the impact of corporate governance on firm value varies across firms of different types of ownership, i.e. state- and non-state-owned enterprises.

Tax Planning To Increase The Value Of The Company

“…Increased added value for investors is created by applying the principles of information disclosure, accountability, responsibility, independence, and equality and fairness. The results of this study found that good corporate governance has a positive effect on company value, thereby supporting research conducted by Ammann et al (2011);Baek, Kang, & Suh Park, (2004); Bhat et al (2018). The results of hypothesis testing prove good corporate governance moderates the effect of tax planning on firm value.…”

“…Increased added value for investors is created by applying the principles of information disclosure, accountability, responsibility, independence, and equality and fairness. Previous research found the level of implementation of good corporate governance has a positive effect on firm value (Ammann, Oesch, & Schmid, 2011;Bhat, Chen, Jebran, & Bhutto, 2018). Based on agency theory and the results of empirical research on the direction of good corporate governance on corporate value, the following hypothesis can be formulated.…”

Board of directors, performance and firm value in Brazilian listed state-owned enterprises

“…In the agency theory perspective, boards play an important role in preventing decisions that are not aligned with the residual claimants' interests (Fama and Jensen;1983). Boards with improved structure and a higher proportion of independent members can exercise better monitoring, and thereby reduce agency conflicts (Bhat et al;. Black et al (2020) explain that an improvement in board structure, aligned with improved disclosure, can have an impact on a firm's market value since expected cash flows to minority shareholders are increased.…”

“…However, there is a lack of studies on which specific aspects of corporate governance (such as board attributes) are associated with firm value (Black et al;2020). Board attributes, such as independence, can lead to higher firm value and performance by reducing agency conflicts (Bhat et al;. Therefore, it is important to understand the relation between corporate governance mechanisms and performance to develop proper corporate and public policies (Kao et al;.…”

“…Considering that board members' decisions can impact the firm's stability, the quality of the board's contributions and actions depends on how such a board is formed (Mathew et al;2016). Bhat et al (2018) argue that agency conflicts are minimized when board members are independent, which leads to better corporate performance. It is not unusual for board members in SOEs to be nominated by members of government, which results in inexperienced, influenced directors who negatively impact firm performance by generating inefficiencies for such firms (Thompson et al;.…”